The Only Difference Between Now and Late 2008

It’s first thing Monday morning; and clearly, the top thought on my mind is the question posed by Saturday’s must hear Audioblog, “has the ‘big one’ commenced?” To which, in my view, it should be difficult for anyone with an unbiased, realistic view to answer anything but YES!

And by the “big one,” I truly mean BIG, per what I have been anticipating since 2011’s “global meltdown II” – i.e., the “point of no return” when the world’s “leading” Central banks realized their post 2008 money printing orgy wasn’t working; and consequently, went all-in with unprecedented, 24/7 money printing, market manipulation, and propaganda in a desperate “Hail Mary” attempt to stave off a violently angry “Economic Mother Nature,” and her “unstoppable tsunami of reality.”

During this “anti-purgatory” period – in which economic and financial sins were not “cleansed,” but soiled beyond recognition – the stage has been set for the same “end game” the world’s previous 500+ fiat currency regimes have experienced; i.e., complete and utter collapse, as the lying, thieving Central banks administering them are universally recognized to be emperors with no clothes. Only this time around, the stakes – and financial losses – will be exponentially higher; given that, for the first time in history, not a single currency is backed by anything but government “faith” and “credit.” In other words, an unparalleled economic calamity, yielding not only the collapse of history’s most overvalued “financial markets” – which I describe in quotes, as freely-traded markets have been “prohibited” since late 2011 – but the weakest economic environment since the great Depression.

Although, frankly, it’s insulting to the Great Depression to make such a comparison; as back then, debt was inconsequential due to the a de facto gold standard; and economic cycles still intact due to the absence, for all intents and purposes, of material government intervention. The U.S., for instance, had just $25 billion of debt following World War I, compared to perhaps $250 trillion today – if relevant, apples-to-apples comparisons are made, including “unfunded liabilities” that must eventually be addressed.

And that’s just the U.S.; i.e., issuer of the world’s current “reserve currency. Worldwide, who knows how large the fiat currency-fostered debt load actually is? According to the McKinsey Institute, just the “on balance sheet” debt of the world’s households, corporations, and governments hit $199 trillion this year, up a whopping $57 trillion since the 2008 financial crisis. However, that number excludes “off balance sheet” items – like $5+ trillion owed by Fannie Mae and Freddie Mac, which the U.S. government, against all generally accepted accounting rules, “hid” when they were nationalized. And of course, said “unfunded liabilities” – which globally speaking, are increasingly at an exponential rate. In other words, it’s entirely possible the global debt load has reached $500 trillion, with nowhere to go but up, especially if when interest rates inevitably explode.

Which is why it’s so laughable that anyone – even the most die-hard propagandists – can even pretend the Federal Reserve is considering monetary policy tightening; as not only is the U.S. government the most indebted entity in global history – for the most part, via short-term debt that would immediately become more onerous if rates were increased; but seven years of maniacal “QE” has transformed the Fed itself into the world’s largest fixed income hedge fund. And unlike the U.S. government, the Fed has put itself into a hideous “duration trap,” by monetizing the Treasury’s long-term debt obligations – thus, subjecting its own balance sheet to violent collapse if rates were to rise even marginally.

This is why I get so angry when even those within our own community ignore reality in lieu of “conspiracy theory” – such as a report circulated this weekend that the Fed was planning a “surprise rate hike” at this Wednesday’s FOMC meeting. Which, if it actually occurred, would go down in history as the most violently suicidal financial act ever executed, given how utterly horrifying the global economic ramifications would be. For one, the miniscule eighth of a percentage point they’d even consider would be enough to destroy historically overvalued financial markets; and second, the explosive dollar surge I predicted nearly two years ago – not due to U.S. economic strength, but a “liquidity vacuum” as the global economy collapses – would go into hyper-drive, destroying what’s left of the U.S. economy “at one fell swoop.” Not to mention, what part of Friday’s “leak” of “confidential” Federal Reserve economic projections – of a dramatically weaker outlook than their publicly stated forecasts are these people missing? As I surmised on Saturday’s Audioblog (as did Peter Schiff, in great detail, on his podcast), the Fed “conveniently, “accidentally” released such data during Friday’s equity, currency, and commodity bloodbath to assuage such fears, by screaming its most dovish statement since the 2008 crisis itself! And by the way, as I write early Monday morning, said bloodbath is exponentially worsening – starting with an 8.5% plunge in the Shanghai composite index, unprecedented PBOC support notwithstanding – representing the second worst day, and barely so, in Chinese equity history. Worse yet, more than 1,500 stocks were halted “limit down,” so it’s entirely possible a 1987-like crash would have occurred otherwise. Oh, the tangled webs we weave, when we seek to deceive.

To that end, I’m not sure I could have been more vehement in my statements over the past six months or so, that China’s equity bubble is the largest in history; which, ominously, pales in comparison to their simultaneously collapsing bubbles in credit – much of it funded by unregulated “shadow banks”; real estate; construction; and industrial capacity. In other words, we are about to see the “flip side” of the “benefits” of Communist economic management, as the “world’s economic engine” explodes into a million bloody pieces. And oh yeah, when the Yuan simultaneously surges because of the PBOC’s insanely suicidal decision to peg it to the dollar, the “final currency war” I warned of 2½ years ago will go nuclear – when the PBOC initiates the financial “big bang to end all big bangs” by de-pegging the Yuan, catalyzing global financial Armageddon. Only then, per what I predicted back in May, will China be forced to consider a more truthful admission of its massive gold hoard – which may well be 20,000 tonnes or more. And when it does – potentially, around the same time the “Yellen Reversal” results in an unprecedented QE4 announcement – the odds of finding any gold and silver to buy, anywhere, at any price, will likely be slim to none.

European equities are plunging as well – with the exception of Greek stocks, which a month after being halted, have still not re-opened, despite the fact Greece was supposedly “saved” two weeks ago. This weekend alone, the ugly stories emerging from Greece – of plans to commandeer the Central bank, re-issue Drachma, and maintain capital controls indefinitely should tell you all you need to know about what’s really going on there. Not to mention, the imploding ADR of what I two-plus years ago deemed the “world’s most important stock” (and “most insolvent entity”), the National Bank of Greece – which is plunging to multi-year lows as I write, enroute to a certain date with ZERO in the coming months (or weeks). And when Greece “goes” – as it most certainly will, “guaranteed Grexit” and all – any remaining hope that the European Union will remain intact will vanish into the ether; along with that remains of the collapsing European economy; its historically overvalued financial markets; and the fragile political stability of not just the PIIGS, but countless other “fringe emerging markets.”

And by “fringe emerging markets,” I’m talking about “first world” markets like the BRICS; European “leaders” like France and Italy; and the “Land of the Setting Sun” – where this weekend, despite the Nikkei stock average hovering around 15-year highs (albeit, 50% below 1989’s all-time high), tens of thousands of people amassed in Tokyo to demand the end of Shinzo Abe’s (second) reign of terror. In other words, permanently destroying the myth that money printing improves economic conditions – particularly for the “99%” that don’t have massive stock portfolios. In Japan’s case, rising Nikkei notwithstanding, the real story is unprecedented debt and – despite a plunging yen – an imploding economy and record low real wages. And this, amidst a “demographic hell” that threatens the very existence of Japan as we have known it. But don’t worry, the Bank of Japan claims “deflation” to be its biggest fear; so rest assured, “Abenomics” will expanded further – until Japan inevitably becomes the first “first world” nation to experience modern-day hyperinflation.

And then, of course, is the horror to end all horrors – which frankly, you’d be hard pressed to find anyone who has warned of so vehemently. Which is, the historic “commodity crash” that will utterly annihilate what remains of the global economy – to the point that, “forensically” speaking, it will be bloodied “beyond recognition” in the not too distant future. Using David Stockman’s research regarding the “deformation” of global financial and economic activity as my base case, I seven months ago made my “direst predictions of all” – i.e., historic oversupply would result in the longest, most painful commodity bear market in history. To wit, as I write, the CRB Commodity Index has fallen to within 1% of the 45-year support level of 200 (eek, copper down another $0.05/lb!); which, when broken, will surely catalyze an economic horror unparalleled in history. And nowhere more so than the United States of “Recovery” – where the vast majority of the $500 billion of junk bonds and “leveraged loans” financing the imploding shale oil bubble will implode like the house in Poltergeist, setting off a chain of defaults that will make 2008 look like a “walk in the park.” Only this time around, the economy will be starting out in its worst condition in decades, if not centuries. And this time, the Federal Reserve – like its Central banking counterparts the world round – will have ZERO ammunition to stop the bleeding, other than hyper-inflating the dollar into oblivion; which if history is a precedent, is all but assured.

Of course, whilst the historic bubbles in industrial commodities, debt, and artificial economic activity the world round implode, the “anti-bubbles” that are gold and silver will explode; as care of the polar opposite “deformations” caused by 15 years of unrelenting Cartel price suppression, perhaps permanentgold and silver shortages are “baked in the cake.” And this, in an environment where physical demand is already at an all-time high, with nowhere to go but exponentially higher; and physical supplies at an all-time low, with nowhere to go but lower. Friday’s Precious Metal reversals, amidst collapsing equities and commodity prices – albeit, comically capped by an increasingly desperate Cartel – should serve as a “warning shot” for those believing gold and silver will not be the financial safe haven assets they have been for the past 5,000 years. Not to mention, Friday’s “big bang” announcement – as I all but screamed was coming – that Anglogold, the world’s third largest gold mining company (with assets heavily concentrated in the high cost South African market) not only lost $3 billion in the first six months of 2015 (i.e, before this month’s historic Cartel paper raids), but is laying off 53,000 workers, or 35% of its entire global workforce. In other words, decidedly proving what I have said all along – i.e., the Cartel has driven paper Precious Metal prices so far below the cost of production, the entire gold and silver mining industry will collapse. And this excludesthe far direr impact of collapsing base metal prices, as roughly half of all silver production is byproduct of copper, zinc, and lead mines – of which, I expect prices to fall so sharply, it would not surprise me if the “Miles Franklin All-Star Silver Panel’s” October 2014 speculation of a potential 50% silver production decline comes to fruition, a lot sooner than most could imagine.

Which brings me to today’s topic – amidst a prototypical night, in which the Cartel executed its 108th “Sunday night sentiment” paper raid of the past 110 weeks; and a prototypical morning, featuring the 482nd “2:15 AM EST” raid of the past 549 trading days. And this, in an environment of an undisputed skyrocketing of global physical demand; vanishing physical inventories; and per the aforementioned Anglogold announcement, soon-to-be collapsing physical production. Which is, that the only difference between the REALITY of today’s horrific global economy – and terrifying economic, political, and social outlook – is the aforementioned, FRAUDULENT manipulation of “financial markets,” fueled solely by Central bank printing presses, to the detriment of “99%” of the global population.

In other words, as I have described endlessly since said “point of no return” in late 2011, the worldwide economy is not only weaker than the spike bottom, deer-in-headlights lows of late 2008 and early 2009, but by many multiples. And again, now that Central banks have spent ALL their monetary ammunition – other than their “end game cache” of hyperinflation – there is no longer a “plan B” available. In other words, hyperinflation – not just here, but everywhere – has become as imminent as it is inevitable. And when it arrives – and arguably, it already has in many nations – either you will have already protected yourself, or permanently forfeited your ability to do so. Which is why, here at the Miles Franklin Blog, we are pleading as loudly and forcefully as ever, to PROTECT YOURSELF, AND DO IT NOW!

19 Comments

RF
on July 27, 2015 at 3:10 pm

The answer is YES, YES, YES.

Thank you for your excellent update.

Ed Mancuso
on July 27, 2015 at 4:05 pm

Once again Hoffman demonstrates and keen awareness of what is really going on in the world, without all the hyperbolic nonsense posted on most other PM websites. People can no longer afford to be cavalier about what is happening. There is a big tsunami on its way, and most complacent slackers will be swept away. Hey baby boomer retirees enjoying life on the golf course with your plump pensions — they’re coming for your pensions soon. It happened in Argentina and elsewhere, and it will happen here too. Then maybe you’ll take Hoffman seriously, after it is too late.

COL Mike
on July 27, 2015 at 4:25 pm

Andy,

Thanks as always for your detailed analysis. You are on the mark.

Side note: have you heard that Bullion Direct filed for chapter 11 bankruptcy on July 20th!

Gonna be funny that their actions to suppress PMs is going to make the inevitable spike that much worse by jacking up the miners…thus supply shortage. I wonder if they even realize this or are they just beating the hell out of it consequence be damned? Seems if I wanted to control the price I would at least hold it at or just above production.

But then the answer of “who” would explain the why. Be a good case for China?

I have always believed they are simply Keystone Kops that wake up each day trying to figure out how to get to the next one. Damn the consequences of their actions, as if they even understand them – or care.

david
on July 27, 2015 at 11:59 pm

Maybe I give them too much credit. LOL Check out the ZH article where they double pumped the USD/JPY, S & P futures, Chinext and Asians stocks all at the same time, not once but twice. LOL Like a ballet of whack a mole.

Tom
on July 28, 2015 at 10:30 am

Or, the government is driving the miners into bankruptcy so that the government can nationalize and own them to bolster their own “new world” accounts.

David Allen
on July 27, 2015 at 5:30 pm

Why does Armstrong Economics paint such a bullish picture for golf, suggesting that it will probable go down to $800. He is a very astute economist with lots of real life experience. He has a big following. Any ideas?

And as for Armstrong, I have plenty of ideas of his motives/intellect, etc…

/i-despise-martin-armstrong

a

David D
on July 27, 2015 at 6:12 pm

the Federal Reserve – like its Central banking counterparts the world round – will have ZERO ammunition to stop the bleeding, other than hyper-inflating the dollar into oblivion; which if history is a precedent, is all but assured…NOT true history shows that reserve currencies (which the us dollar is )like the previous reserve currency (British Pound )didn’t hyperinflate sure it revalued lower but its still in circulation so no hyperinflation .Some of the world did (Germany,Hungary etc…)and this brings me to the next issue .
Mrs Yellen will raise rates because we are in a currency war not a financial war there is a difference The fed is no longer in the business of propping up the stock markets but to win the currency war ounce and for all and thus the dollar will rise while everyone else’s goes in the toilet and that my friend is how you win a currency war, then after that the US will default on its debt just like the british did at the end of ww2https://www.bondvigilantes.com/blog/2010/02/02/what-happened-the-last-time-the-uk-defaulted/
the link to british default history.
PS yes history does repeat itself and the SDR will be the next reserve currency, laugh if want but your old bud Bill Holter is now suggesting that the yuan may be included in the SDR basket and of course after world currencies have hyperinflated (Except US due to yellen raising rates) the world will peg to the SDR the country with the most PMs will fare the best all makes sense to me Bill taught me well.

Not sure you can say more things I disagree with – or put more words into my mouth. However, I don’t have time to argue, so suit yourself.

david
on July 27, 2015 at 11:51 pm

I seriously doubt Bill taught you yellon raising rates would prevent hyperinflation. Rates rising hurts housing, auto loans, raises the debt payments on the short term rollovers of our govt debt, would probably jack up interest rate based derivatives, etc. It makes the dollar go up which further hurts our multinationals slowing us even more. If anything this leads to more money printing trying to clean up the mess which would lead towards inflation. I will eat my hat if she raises rates.

Harry
on July 28, 2015 at 1:49 am

Thank you for your timely and thought provoking analysis which I read with great interest from the UK. Your fan base has spread across the pond and hopefully further!

It sure has Andy – that’s (at least) two Hoffman groupies in the UK now then! :-))

Maurice

Frank
on July 28, 2015 at 9:59 am

That the dollar rises is a bad sign, not a winning sign.
Might be cuz the value goes out of the capital into cash …
Bond thrashing ?!

Anyway, being in Germany I cant bear the negativ gold propaganda and the unfounded articles the presstitutes put out in recent times …
Hope they get stuffed soon.

Nelson
on July 28, 2015 at 1:00 pm

Great information. I will be posting on fb for my friends (few) who are actually awake. So sad that the general populace is not paying attention.

Red#1
on July 28, 2015 at 4:20 pm

I’ve been reading your stuff for a long time and I think this is one of your best. It sounds like we are headed for another Dark Ages. I am going to reread it and click everything in it and I think it will give an education I might not what to learn. Not 1 person in 1,000 really knows what is about to explode.

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